New Orleans, Louisiana is a great American city. During my brief stay in
March of this year, I thoroughly enjoyed the seafood jambalaya, the
charming architecture of the French Quarter, the Mardi Gras Indians
parading on Super Sunday—and of course, the jazz: the intricate, lovely,
boisterous, life-affirming jazz. I encourage everyone to visit. I had a
wonderful time, and can’t wait to go back.

Nevertheless, the city of New Orleans has suffered, and continues to
suffer, from planned chaos that keeps it from being even more fabulous.
The
Mother’s Day parade shooting
that injured 19 this past weekend is only one small instance of the
city’s failings. During a drive around town, I saw many houses still
boarded up, evidence of the devastation caused by Hurricane Katrina
eight years ago this summer.

Natural Disaster Enabled

On the face of it, there is no chaos more unplanned than a
hurricane, which strikes unpredictably with unpredictable force. Still,
certain areas are hit with hurricanes on a regular basis. The Gulf Coast
of the United States is one of those areas. Indeed, according to a
bipartisan Congressional investigation into
Katrina and its aftermath,
poor planning had a lot to do with this tragic event: “It remains
difficult to understand how government could respond so ineffectively to
a disaster that was anticipated for years, and for which specific dire
warnings had been issued for days. This crisis was not only predictable,
it was predicted.” The hurricane itself cannot be blamed on government,
but the failure to prepare and respond appropriately can and should.

The most obvious failure to prepare was the inadequate levees protecting
New Orleans from flooding. Most of the metropolitan area is actually
below sea level, making it particularly vulnerable to hurricanes. After
Hurricane Betsy hit New Orleans in 1965, killing 81 and injuring
thousands, the US Army Corps of Engineers built tall embankments, or
levees, along the Mississippi River and other waterways. However,
according to the Congressional report, “The levees protecting New
Orleans were not built to survive the most severe hurricanes. It was a
well-known and repeatedly documented fact that a severe hurricane could
lead to overtopping or breaching of the levees and flooding of the
metropolitan area.” The report also states that “responsibilities for
levee operations and maintenance were diffuse.” The question was not if
the levees would fail, but when they would fail.

On August 29, 2005, they failed. Hurricane Katrina killed nearly 2,000
people and caused over $100 billion in damages, with the death and
destruction
both concentrated in New Orleans. In early 2008,
a Federal District Court judge found that the US Army Corps of Engineers
was guilty of “gross incompetence.” He was unable to actually hold them
liable, however, because the Flood Control Act of 1928 grants
legal immunity to the government
in such matters.

“It is impossible to say
exactly how things would have played out in the summer of
2005 if New Orleans had benefited from freer markets and
less government, but thinking about how markets incentivize
people can suggest some possibilities.”

Apart from the levees, the Congressional report also found fault with
the evacuation effort leading up to the storm and with many aspects of
the response during the storm itself and in the days and weeks that
followed. I only read bits and pieces of the report. Those who want to
wade through all of the sordid details are free to examine its 520 pages
themselves, but just the first dozen or so are filled with enough
damning statements to give a sense of the scope of government failure
involved:

"It has
become increasingly clear that local, state, and federal government
agencies failed to meet the needs of the residents of Louisiana,
Mississippi, and Alabama."

"Our
investigation revealed that Katrina was a national failure, an
abdication of the most solemn obligation to provide for the common
welfare."

"We found
many examples of astounding individual initiative that saved lives
and stand in stark contrast to the larger institutional failures."

"The
Select Committee identified failures at all levels of government
that significantly undermined and detracted from the heroic efforts
of first responders, private individuals and organizations,
faith-based groups, and others."

Incentives Matter

Predictably, the drafters of the report, while severely criticizing
government preparation for and response to Hurricane Katrina, simply
called for government to be better. They wrote, “We again encountered
the risk-averse culture that pervades big government, and again
recognized the need for organizations as agile and responsive as the 21st
century world in which we live.” But it is pointless to hope that big
government will mend its ways. Nowhere and never has big government been
agile and responsive. For traits like these, we need to turn to agents
on the free market.

How would free markets have produced less planned chaos and more
spontaneous order in preparation for and response to Hurricane Katrina?
Governments are just made up of people, after all. Why should we expect
people to act and react more appropriately in a market setting? In a
word, incentives. As the public choice school of economics
has taught
us,
politicians’ and bureaucrats’ incentives are skewed toward getting
elected, getting re-elected, amassing power, and covering their asses.
They tend to be drawn to programs and policies with visible,
concentrated, upfront benefits and hidden, diffuse, down-the-road costs.
Programs and policies that fail are often rewarded with more
responsibility, more staff, and more money.

Market players, on the other hand, are tuned in to the information
contained in price signals and exposed to the rigours of competition. If
they try to ignore what their employers, customers, suppliers, and
others are telling them, they suffer the consequences. If they act
rationally, exercising appropriate prudence, intelligence, and effort,
they tend to reap the rewards.

It is impossible to say exactly how things would have played out in the
summer of 2005 if New Orleans had benefited from freer markets and less
government, but thinking about how markets incentivize people can
suggest some possibilities. Most obviously, not having legal immunity
from “gross incompetence,” private contractors would have had good
reason to build levees that would stand up under pressure in the first
place. Those in charge of maintaining those levees would also have had a
greater incentive to do their jobs. Alternately, if the danger of
flooding were not effectively guarded against, insurance companies would
raise premiums or refuse to provide coverage at all, sending a signal to
the market that some action was required. With skin in the game, unlike
bureaucrats and politicians, property owners would be incentivized to
take appropriate action.

The Congressional report is entitled “A Failure of Initiative,” but the
devastation caused by Hurricane Katrina was really due to a failure of
incentives. Government agents’ incentives are skewed, and government
programs and policies often end up skewing everyone else’s incentives
too. Free markets—as long as they are not undermined by the actions of
governments and their privilege-seeking clients—punish failure and
reward success. They thereby provide incentives for people to see to
their own long-term interests, and so give rise to a spontaneous order
no central planner could ever come close to imitating. For better
natural disaster preparation and response, what the world needs is less
planned chaos and more
unplanned order.

Bradley Doucet is a writer living
in Montreal. He has studied philosophy and economics, and is
currently completing a novel on the pursuit of happiness. He also is
QL's English Editor.